Wednesday, May 15, 2002

Web radio The government mandated royalty rates for Web Radio are finally being debated up on Capital Hill. But it's hard to set rates right, and its hard to change rates once they're set. In a market, so long as rate setters can discriminate between customers, they will fall (or rise) to the appropriate level. For Web Radio, this number will be zero.

It may seem counter intuitive that fixed, nondiscriminatory rates actually support collusion, but only this type of government mandate can effectively keep copyright holders from surreptitiously undercutting each other.

Similarly, it is copyright's weakness that's slowing the development of "open source" media with no copy restriction. Right now, there's no difference between downloading a copyright song and a non-copyright song. The more perfect a content holder's ability to price discriminate, the more attractive the non-encumbered substititues.


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